2016 Tax Brackets, Standard Deduction, Personal Exemption, and Other Updates

Every year, I publish a brief update regarding significant tax changes for the following year. For 2016, there’s no big news. But we’re going to do this anyway, because I know many people (myself included!) find it helpful to have a quick reference throughout the year. If you want even more details, the official IRS announcement can be found here.

The tax brackets for 2016 are as follows:

Single 2016 Tax Brackets

Married Filing Jointly 2016 Tax Brackets

Head of Household 2016 Tax Brackets

Married Filing Separately 2016 Tax Brackets

Standard Deduction Amounts

The 2016 standard deduction amounts will be as follows:

• Single or married filing separately: $6,300
• Married filing jointly: $12,600
• Head of household: $9,300

The additional standard deduction for people who have reached age 65 (or who are blind) is $1,250 for married taxpayers or $1,550 for unmarried taxpayers.

Personal Exemption Amount and Phaseout

The personal exemption amount for 2016 is $4,050.

However, the total personal exemptions to which you’re entitled will be phased out (i.e., reduced and eventually eliminated) as your adjusted gross income (i.e., the last line of the first page of your Form 1040) moves through a certain range.

• For single taxpayers, personal exemptions begin to be phased out at $259,400 and are fully phased out by $381,900.
• For married taxpayers filing jointly, personal exemptions begin to be phased out at $311,300 and are fully phased out by $433,800.
• For taxpayers filing as head of household, personal exemptions begin to be phased out at $285,350 and are fully phased out by $407,850.
• For married taxpayers filing separately, personal exemptions begin to be phased out at $155,650 and are fully phased out by $216,900.

Limitation on Itemized Deductions

As was the case for the last few years, the amount of itemized deductions which you are allowed to claim is reduced by 3% of the amount by which your adjusted gross income exceeds certain threshold amounts. These threshold amounts are the same as the lower threshold amounts listed above for the personal exemption phaseout (e.g., $259,400 for single taxpayers). However:

1. Your itemized deductions cannot be reduced by more than 80% as a result of this limitation, and
2. Your itemized deductions for medical expenses, investment interest expense, casualty/theft losses, and gambling losses are not reduced as a result of this limitation.

IRA and 401(k) Contribution Limits

For 2016, the contribution limit to Roth and traditional IRAs is unchanged at $5,500, with an additional catch-up contribution of $1,000 for people age 50 or older.

The contribution limit for 401(k), 403(b), and most 457 plans is unchanged at $18,000, with an additional catch-up contribution of $6,000 for people age 50 or older.

The maximum possible contribution for defined contribution plans (e.g., for a self-employed person with a sufficiently high income contributing to a SEP IRA) is unchanged at $53,000.

AMT Exemption Amount

After adjusting for inflation, the following are the AMT exemptions for 2016:

• $53,900 for single taxpayers,
• $83,800 for married taxpayers filing jointly, and
• $41,900 for married taxpayers filing separately.

“Shared Responsibility Payment” (Penalty for No Health Insurance)

As with 2015, one of the biggest changes for individual income tax is that the calculation of the penalty for having no health insurance is increasing (according to schedule). Healthcare.gov has the details of the calculation here.